Pacific Grove’s vacation rental policy gets mixed reviews as city cracks down.

When one P.G. woman and her husband bought a home in Pacific Grove several years ago, they factored in the money they could make renting out the separate in-law unit. After closing on the house, remodeling and taking out a second homeowners policy, they posted their listing on vacation rental website Airbnb.

Now the city is allegedly asking them to pay back the $47,000 they’ve made on the rental since.

Pacific Grove has one of the county’s first programs for licensing short-term rental units. Licensees pay a $200-per-year permit fee and 10 percent transient-occupancy tax (TOT) on their revenues.

Jan Leasure, who helped the city draft the short-term rental ordinance, says the licensing process is simple. “We knew that if we didn’t make it easy, owners would not sign up,” she says.

But five years into the program, a quick Internet search suggests only a minority of P.G.’s short-term rentals are legal. There are currently 173 transient use licensees in the city, according to P.G. Housing Coordinator Terri Schaeffer. But a March 16 search of Airbnb and VRBO produces 695 and 138 rentals in P.G., respectively.

P.G. doesn’t have the resources to go after all the illegal short-term rentals, Schaeffer says, so city staff limit their enforcement energy to complaints – only four for unlicensed units last year.

The owner of one of those rentals, she adds, settled with the city by agreeing to pay penalties based on the unpaid TOT and revenue earned while operating without a license.

In other cases, homeowners who believe they have valid short-term rental units are discovering they don’t qualify for licenses. Schaeffer says two applications for transient use licenses were denied last year.

One of those was of the aforementioned homeowner, who told the Weekly her story but asked to remain anonymous.

After she applied for a license last summer, she says, city staff found her in-law unit fit most of the criteria – a free-standing dwelling with a place to sleep and a bathroom – but lacked the required kitchen area. She hadn’t realized she needed one. “There’s nothing on the permit that would make you think you wouldn’t qualify,” she says.

Several weeks later, she says, city officials told her they’d received a complaint about her rental and slapped her with the fine. (Schaeffer declined to comment on specific enforcement cases.) The homeowner has hired an attorney and is preparing for an administrative review of her case.

But Leasure, who manages some of P.G.’s licensed short-term rentals as a managing broker for Monterey Bay Vacation Rentals, says the city’s law levels the playing field. “The sharing economy is here to stay,” she says, “but everybody in the rental home and hotel business should register and pay the tax.”